Consumer prices set to fall in '09 (after a 54-year rise)

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A New York City cab driver filled his tank with gasoline in June. Energy prices in July were down 28 percent from a year ago, the Department of Labor reported Friday.

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Americans are on track to get their first break from rising prices since 1955.

The cost of consumer goods, as measured by the consumer price index (CPI), was flat in July compared with June – and down an average of nearly 1 percent for the first seven months of this year compared with the same period a year ago, according to data released Friday by the US Department of Labor.

But don't get too excited. All that decline is coming at the gas pump. From sky-high gasoline prices a year ago, the cost of energy has declined a whopping 28 percent. Stripping out energy and food (another volatile category), the so-called core CPI in July increased 1.7 percent from a year ago.

"It remains our belief that core price measures will keep to a disinflationary path," wrote economist Joshua Shapiro of MFR Inc. in an analysis of Friday's CPI.

The other likely scenario is that the US is poised for a stretch of stable pricing. While prices for apparel and medical care climbed from June to July, and airline fares rose after a long series of monthly drops, food and housing costs fell in the period.

A huge spurt of inflation – the fear of more gloomy analysts – seems a distant danger.
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